Management of Savings and Credit Cooperatives from the Perspective of Outreach and Sustainability: Evidence from Southern Tigrai of Ethiopia

Abstract

The rural economy and the urban economy in Ethiopia are largely disconnected .While urban banks have excess liquidity, which costs them money to manage, and some rural people have opportunities requiring credit to be profitable that are low risk, there is no mechanism to bring this liquidity from urban banks to rural businesses. Saving and Credit Cooperatives (SACCOs) can be the link that will give urban banks low risk loan opportunities in rural areas and give rural businesses access to credit at costs for lower than interest rates currently charged by moneylenders. So, this paper is concerned with management of SACCOs from the perspective of outreach and sustainability of Rural SACCOs to reach large number of members. The required data were obtained from members and SACCO documentation and analyzed using tables and percentages, financial ratios, and correlation analysis with the help of MINITAB, a statistical package. The descriptive findings show that membership and financial performance of the SACCOs under study showed an improving trend over the study period. The result of correlation analysis between independent variables and dependent variable showed that existence of strong positive correlation between financial performance (ROA) and the asset utilization. A moderate positive correlation relationship exists between operational efficiency and size of SACCOs (assets size). Conversely, there is a significant negative correlation between financial performance (ROA) and the operational efficiency with correlation coefficients. The study also came out with a range of perspectives on the factors affecting the outreach and sustainability of SACCOs under study. Lack of awareness and poor saving culture, weak organizational arrangement and governance, policy and regulatory environment, weak institutional capacity, low capital base, lack of differentiated products, inappropriate loan security requirements, and threats from other financial institutions (MFIs) were among the factors affecting the outreach and sustainability of SACCOs.

Keywords: outreach, sustainability, savings and Credit Cooperatives, correlation analysis, Southern Tigrai, Ethiopia